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So the title says it all.
I have been around Tesla since my first test drive on January 14th 2013. I have been an investor since March 2013. I have followed the company since ~$35, and held strong since. I have made tons of money, and also gotten burned like a lot of you guys on Q3. Of course I just graduated college so tons of money for me is equivalent to a day's trade for many of you guys, but I digress.

At what point do we start questioning the valuation of this company? There is so much positive energy around these forms, especially on days like today when we are up 10%+ that we forget to be rational. Tesla is an amazing company and there are simply no words to describe the car. But these valuations are clearly speaking to Tesla being more than just a car company. How do we correctly price in the risk factors when the company won't grow into its valuation for another 5-10 years? At some point this euphoria has to die out. I feel like $180-$200 is a decent price for the stock, but $255 is simply madness is it not?
I know all of us here can make a case for why the company should be worth a lot of money, but should it be worth over $30B when you discount for time value of money and take into consideration the risk factors involved? Is Tesla simply another product of the crazy tech bubble where companies like Whatsapp are valued at $19B, FB at $175B and GOOG at $410B? At what point do we say enough is enough, the price has gotten too high for the tesla fans to buy into the company?

I asked a similar question in one of the short term threads a day or two ago. The response I got was basically "You can't compare to other car companies". While that might be true, it didn't really answer the question. If we can't compare to other car companies, what do we compare to?

I have no idea. I'm not sure how you create a metric for a market that almost didn't exist a couple years ago and has such rapidly changing core industries behind it (e.g. gigafactory).

So the title says it all.
I have been around Tesla since my first test drive on January 14th 2013. I have been an investor since March 2013. I have followed the company since ~$35, and held strong since. I have made tons of money, and also gotten burned like a lot of you guys on Q3. Of course I just graduated college so tons of money for me is equivalent to a day's trade for many of you guys, but I digress.

At what point do we start questioning the valuation of this company? There is so much positive energy around these forms, especially on days like today when we are up 10%+ that we forget to be rational. Tesla is an amazing company and there are simply no words to describe the car. But these valuations are clearly speaking to Tesla being more than just a car company. How do we correctly price in the risk factors when the company won't grow into its valuation for another 5-10 years? At some point this euphoria has to die out. I feel like $180-$200 is a decent price for the stock, but $255 is simply madness is it not?
I know all of us here can make a case for why the company should be worth a lot of money, but should it be worth over $30B when you discount for time value of money and take into consideration the risk factors involved? Is Tesla simply another product of the crazy tech bubble where companies like Whatsapp are valued at $19B, FB at $175B and GOOG at $410B? At what point do we say enough is enough, the price has gotten too high for the tesla fans to buy into the company?

So the title says it all.
I have been around Tesla since my first test drive on January 14th 2013. I have been an investor since March 2013. I have followed the company since ~$35, and held strong since. I have made tons of money, and also gotten burned like a lot of you guys on Q3. Of course I just graduated college so tons of money for me is equivalent to a day's trade for many of you guys, but I digress.

At what point do we start questioning the valuation of this company? There is so much positive energy around these forms, especially on days like today when we are up 10%+ that we forget to be rational. Tesla is an amazing company and there are simply no words to describe the car. But these valuations are clearly speaking to Tesla being more than just a car company. How do we correctly price in the risk factors when the company won't grow into its valuation for another 5-10 years? At some point this euphoria has to die out. I feel like $180-$200 is a decent price for the stock, but $255 is simply madness is it not?
I know all of us here can make a case for why the company should be worth a lot of money, but should it be worth over $30B when you discount for time value of money and take into consideration the risk factors involved? Is Tesla simply another product of the crazy tech bubble where companies like Whatsapp are valued at $19B, FB at $175B and GOOG at $410B? At what point do we say enough is enough, the price has gotten too high for the tesla fans to buy into the company?

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Hershey, I understand why you ask this question.

for me, I've done forecasts of what I think eps will be around 2020, and 2025, and I think $220 is about fair value now, without building in ancillary businesses the Morgan Stanley report suggests.

so, we're 15% above fair value... do I sell? no. here's why: I think the shares (weighing in successful and stumbling scenarios) will be worth ~$450 in 2020. I'm not worried about possibly being 15% ahead of ourselves when I see us still likely to go up 80% in 6 years. I know over the long hall the market returns 10%, but frankly, I'm more concerned that the market is overvalued, and will underperform the next 6 years than Tesla. With Tesla I also get the chance that they exceed expectations (i.e. enter ancillary businesses in a meaningful way as MS suggested).

fwiw, this is not simply rationalizing as I go... my rule is I only look at adding shares 30% below what I think is fair value, and only consider selling some shares 30% above what I think is fair value (I might trim 15% or so at $290). I've had this rule since a month of two after last spring's volatility when friends constantly said, buy? sell?

You either believe/calculate TSLA valuation is based on their ability to disrupt/create trillion dollar markets or you hedge against it. Some days I question and re-visit my beliefs/calculations to again come to the conclusion that TSLA is undervalued for what their stated/non-stated goals have in store for the markets at large.

I get a ton of reassurance by listening to JB speak these days. Absolutely brilliant guy.

FluxCap, I've been looking for the full text of that MS note online, but I can't seem to find it anywhere... do you have a link to it?

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I'm a Morgan Stanley client, so I have access to their research reports. The full report is not publicly available. I've quoted about as much as is reasonable, but you can feel free to link to the image I posted if you wish.

There is actually a lot in common with TSLA and the social media stocks. Cheap money. As long as the Fed is printing and interest rates are zero, money will find a home in the stock market and these high flyers.

After living through the dot com boom and bust, I've seen this movie before. Tesla is not pets.com but Cisco at 80 in 2000 was not realistic either.

My advice is to enjoy the ride and don't watch TSLA for when to get out, watch the overall market and especially changes in the Fed's monetary policy.

For years after Amazon was founded, Jeff Bezos had a statement that he constantly used and reminded his team about: "Today is Day One." Even after major accomplishments and milestones, he'd repeat it: "Today is Day One."

I think that is even more true with Tesla. We are still so early in the game, it's not funny. This is about as buy-it-and-forget-about-it a stock ever gets. Sure, it'll have wild swings but the progress keeps moving up and to the right. I think the general market has a long while to go before they truly appreciate how much a lead Tesla has on building out and owning and profiting from the infrastructure for sustainable transportation around the world. And contributing to renewable, sustainable energy as well.

I think the analysts start to realize that Tesla has an awesome business model for the afterlife of batteries.

Lets say you get a new battery after 10years, so you have your old 85kw battery, lets assume worst case and it has 40kw capacity left.
those 40kw are bad a a car battery, but as a local grid storage for a solar house that tries to balance its peak consumption it will be almost an overkill.
So the Batteries would have a second live, notice that the batteries packs have awesome logistic capabilities, there are complete and can be attached to their new home in a matter of hours.
It would be definitely more profitable to use those batteries for a second live instead of recycling them. So after a second life of about 10years Tesla can finally recycle them.

And since Tesla is working in a close cooperation with SolarCity it will have a much better access to the market of grid storage.

To be honest I also only recognized the implications of this in the last couple weeks, before that I was always thinking that grid storage is a small market for straight out the factory tesla cells, since its not price competitive. But as SecondHand batteries it becomes an awesome business.

Such a long live cycle also means that the Integrated Recycling facility in the Gigafactory can wait for at least another 15years, thats when a huge amount of batteries will come in that already had a CarCycle and a GridCycle behind them and are ready to be recycled.
Before that there wont be to many Tesla Batteries packs to be recycled, the amount will be so small that it can be done by some small company.

I think the MS note is getting to the point where the broader investment community is looking and Elon and the team and saying "what if we actually listen to them." I think many people on this board have pointed out the opportunity between TSLA and SCTY to recycle the Model S batteries into grid storage and many have pointed out that the cars themselves could also provide capacity to smooth out 24 hr electricity production / consumption cycles. Saying that TSLA "can't" do this because no else has done it and therefore we won't value the possibility is very different from the ground-up approach espoused by Elon and realizing that with the technology in TSLA, the Model S, SCTY and now the Gigafactory that, in-fact, they do have the technical capacity for significant disruption beyond just the auto industry.

I was around for the dot com boom and bust as well. From what I remember the Fed had nothing to do with that cycle. What I do remember is everyone saying "how are you going to make money from some ugly web pages" while the companies that became today's leaders were completely upending the traditional newspaper industry. Or "no one will buy anything other than books from the internet" when today even WalMart is under substantial pressure due to online sales. Or online flights, hotels, car sales, restaurant reservations, car sales, dating, digital pictures, youtube.... Twenty years ago yahoo launched. I would say that the dot com era completely changed industry across the planet.

My question is TSLA just changing the car industry? My opinion is that in listening to Elon and JB and the rest they are on a bigger mission and feel that most, if not all, of the technology needed already exists. So my bet is on vision and execution.

Everyone also forgets the hyperloop. I think it was another example of brilliant engineering aligned with today's technologies. To met that is what TSLA is about.

I think the analysts start to realize that Tesla has an awesome business model for the afterlife of batteries.

Lets say you get a new battery after 10years, so you have your old 85kw battery, lets assume worst case and it has 40kw capacity left.
those 40kw are bad a a car battery, but as a local grid storage for a solar house that tries to balance its peak consumption it will be almost an overkill.
So the Batteries would have a second live, notice that the batteries packs have awesome logistic capabilities, there are complete and can be attached to their new home in a matter of hours.
It would be definitely more profitable to use those batteries for a second live instead of recycling them. So after a second life of about 10years Tesla can finally recycle them.

And since Tesla is working in a close cooperation with SolarCity it will have a much better access to the market of grid storage.

To be honest I also only recognized the implications of this in the last couple weeks, before that I was always thinking that grid storage is a small market for straight out the factory tesla cells, since its not price competitive. But as SecondHand batteries it becomes an awesome business.

Such a long live cycle also means that the Integrated Recycling facility in the Gigafactory can wait for at least another 15years, thats when a huge amount of batteries will come in that already had a CarCycle and a GridCycle behind them and are ready to be recycled.
Before that there wont be to many Tesla Batteries packs to be recycled, the amount will be so small that it can be done by some small company.

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I disagree with you here on the back-up and recycling.

- Used batteries are not that great for back-up. Used batteries are degraded, inconsistent and could have a short life. Failures add cost to end-users.
- Also, Tesla's cells require a TMS, which means it's not that easy to build a back-up system out of them.

To me, these make the full cycle very important in the gigafactory concept because it means Tesla, with their expertise in managing their own batteries, can take in every single old Tesla battery, then process it however they want. If it's usable, stick it in a storage array to manage their wind and solar until it fails. If it's DOA, straight to recycling. This also minimizes the transportation costs in the loop. Automation would be important: technology that enables robotic installation or removal in a factory or Superswapper would also allow robotic swapping in and out of a storage array. 10 years in a car, 5 years in storage array, add 1 year as a buffer and work towards a 16 year closed material loop.

I think it's better to focus on the economics of new batteries in the storage business. The cheaper they get the cheaper demand-peak management and off-grid become. The cheaper Supercharger back-up and supplement become. The cheaper solar output management can become. There are inherently better solutions for grid management that the Tesla-Panasonic cells, but mass production can overcome inherent superiority. Plus, there's always the possibility that Tesla/Umicore/Solar City could link up with manufacturers of other battery technologies and incorporate them into the gigafactory concept.

- Also, Tesla's cells require a TMS, which means it's not that easy to build a back-up system out of them.

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I assume you're referencing the "Thermal Management System"? That doesn't much matter when they're inside a controlled environment (e.g., inside the house) does it? And it means it can be used outside, right?

Each cell is separate and has a separate fuse, while I agree with you that an old battery will have much more cells that will fail, those cells will be just shutoff by the fuses.
And even if 20-30% of the cells fail its still a very good gridstorage battery.
Grid Storage batteries have a much smother life then Car batteries, their peak charge und uncharge powers are around 10up/10down instead of 135up/200down.

Its saves a lot of money if you can just put those batteries right into grid storage, maybe do a quick electronic checkup and check how many cells are still working.
Instead of processing them in a plant first.

Regarding the Thermal Managment, Active cooling is not really needed since the loadpower is so low that It wont get really warm.
Active warming in the Winter can be acchived in the same way its done now, by electric heating it.

Also regarding the suggestion to use the car as a GridStorage directly, Elon answered that question in a Q&A already and said it would not be economically to use the limited charge cycles of a battery for Grid storage.
That means that it would be more economically to buy some other form of GridStorage lets say Lead-Acid etc., instead of wasting load cycles on the Tesla battery.

Also regarding the suggestion to use the car as a GridStorage directly, Elon answered that question in a Q&A already and said it would not be economically to use the limited charge cycles of a battery for Grid storage.
That means that it would be more economically to buy some other form of GridStorage lets say Lead-Acid etc., instead of wasting load cycles on the Tesla battery.

for me, I've done forecasts of what I think eps will be around 2020, and 2025, and I think $220 is about fair value now, without building in ancillary businesses the Morgan Stanley report suggests.

so, we're 15% above fair value... do I sell? no. here's why: I think the shares (weighing in successful and stumbling scenarios) will be worth ~$450 in 2020. I'm not worried about possibly being 15% ahead of ourselves when I see us still likely to go up 80% in 6 years. I know over the long hall the market returns 10%, but frankly, I'm more concerned that the market is overvalued, and will underperform the next 6 years than Tesla. With Tesla I also get the chance that they exceed expectations (i.e. enter ancillary businesses in a meaningful way as MS suggested).

fwiw, this is not simply rationalizing as I go... my rule is I only look at adding shares 30% below what I think is fair value, and only consider selling some shares 30% above what I think is fair value (I might trim 15% or so at $290). I've had this rule since a month of two after last spring's volatility when friends constantly said, buy? sell?

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Fair enough. But 80% over 6 years, while decent, is not what one wants to see from a growth stock. When people realize this, they will dump the stock and look for better opportunities, and this is going to cause the type of volatility we had post Q3. Thats what I want to avoid.

For years after Amazon was founded, Jeff Bezos had a statement that he constantly used and reminded his team about: "Today is Day One." Even after major accomplishments and milestones, he'd repeat it: "Today is Day One."

I think that is even more true with Tesla. We are still so early in the game, it's not funny. This is about as buy-it-and-forget-about-it a stock ever gets. Sure, it'll have wild swings but the progress keeps moving up and to the right. I think the general market has a long while to go before they truly appreciate how much a lead Tesla has on building out and owning and profiting from the infrastructure for sustainable transportation around the world. And contributing to renewable, sustainable energy as well.

I'm holdin'.

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i agree...the stock ultimately could be even a 100-bagger from here in 10-20 years time from now with all of the opportunity they have to revolutionize the auto and energy storage industries.

If you are ok with 2 year+ time horizon then there is no reason to sell...if you were planning to sell this year for some personal financial event (ie. buying a house, retirement, etc.) then this could be a good time to sell if you don't want to gamble with the volatile swings over the coming months.